Economists consider path to recovery

University President Richard Levin moderated the second half of “The Economy and the Election” panel at Yale Law School Thursday.
University President Richard Levin moderated the second half of “The Economy and the Election” panel at Yale Law School Thursday. Photo by Henry Ehrenberg.

With just five days until the 2012 presidential election, Yale hosted a panel to address the macroeconomic issues Americans should consider before taking to the polls.

University President Richard Levin moderated a discussion featuring five renowned economists from Yale and Columbia in front of a packed Yale Law School auditorium on Thursday night. The panel — the second in a two-part series entitled “The Economy and the Election” — aimed to present a nonpartisan overview of America’s current economic troubles, though Levin said the event was intended to inform the audience’s voting. The panelists’ focused their discussion on the fiscal cliff, the leverage cycle and the need for the Federal Reserve to take on a larger role in helping the United States recover from the 2008 global financial downturn.

“[Fed Chairman] Ben Bernanke is a good man who dearly wants to put Americans back to work,” said Yale economics professor John Geanakoplos, one of the panelists. “But one man can’t do everything. He needs more tools than just inflation.”

Yale economics professor Robert Shiller said he combined all four national debates — the three presidential debates and the one vice-presidential debate — into one document and searched for commonly used words. He said he found the word “jobs” 161 times, the word “economy” 101 times, but no politician mentioned the Federal Reserve — an institution that every economist on the panel viewed as essential to emerging from the recession.

Geanakoplos, who went through a 69-slide presentation entitled “What Caused the 2007–9 Crisis and How I Think We Should Have Prevented and Fixed It” in 20 minutes, said Congress and the Treasury must support the Fed in regulating leverage ratios — or the relationship between an asset’s value and price — to stimulate economic growth.

Columbia economics professor Michael Woodford discussed the issue of interest rates on loans and warned of approaching a 0 percent interest rate, which is the “zero lower bound.” He said low interest rates typically help the economy grow but added that without any ability to set interest rates, the Fed loses an important tool for stimulating the economy. He said excessively low interest rates perpetuate the leverage cycle.

“It is very rare for the Fed to talk this way,” Woodford said. “It is very rare for [interest rates] to go that low.”

Woodford also said the economy’s unusually slow recovery is illustrated by statistics on the slow decline in unemployment and the remaining 6 percent gap between potential GDP output and real GDP output.

Yale professor of economics William Nordhaus said that it is necessary to enact a fiscal stimulus before the economy encounters the fiscal cliff — a combination of the expiration of Bush-era tax cuts and a decline in government spending that would cause a major decrease in GDP. Though most people think government spending should decrease over the next years, he added that in the short term, he believes it should increase for a better long-term economic outlook.

When introducing the panel, Levin said he hoped the discussion would address ways to improve the economy and reduce unemployment.

“The purpose of these discussions is not to persuade any of you, but to illuminate the major economic issues that face the nation at this time and look at them from various perspectives,” he said.

Three audience members interviewed said they enjoyed hearing the different expert perspectives in dialogue but were disappointed that each presidential candidate’s policy was not examined more closely.

“I’ve been in discussions with friends about the economy and since I’m nearing retirement age, I would like to understand what to expect in the future, what the proposed changes might be to our policies,” said Mary Lewis, an nurse at Yale-New Haven Hospital.

The first panel in the “The Economy and the Election” series took place Oct. 10 and focused on health care reform, taxes and the budget deficit.

Comments

  • Goldie08

    Does anyone know where to find a replay or a copy of the slides?

  • The Anti-Yale

    Go to http://www.youtube.com/yale to watch the panel live.

    What gives?

    Your report and your photo completely exclude the only professor on the panel to challenge the Keynesian model. :Aleh Tsivinski, professor of economics at Yale, and an authority at the intersection of macroeconomics and public economics.

    Is this bias or simply poor reporting and photo-editing?

    PK